The Payday Loan Industry

Here is an interesting piece on the payday loan industry. Many people decry this industry as unethical, and from a certain vantage point perhaps it is. But it serves a function, and there is obviously a demand because the damn things are everywhere.

Most opposition to high-interest lending echoes that of Ms. Moncrief. But these lending shops provide a service to low-income residents or people with credit problems whom banks and other mainstream financial institutions have abandoned. In many cases, these lenders came into existence because do-gooders passed usury laws which prevented more "reputable" institutions from providing high-interest loans to people who are legitimately perceived to be credit risks. And since the fixed costs associated with setting up a loan are similar, whether a person is borrowing $100 or $100,000, it should be no surprise that payday lenders would charge higher fees or interest rates, since they're dealing with loans of lower amounts.

It is like any other thing in business or life – it serves a valid purpose, but some people overuse or misuse it. That is why personal responsibility is so important. If someone gets into a rut and falls deeper and deeper into a financial hole, it is not the fault of a payday loan place. The people who use such services are just as responsible for their own finances as the rest of us.